The state is investigating a defunct Salt Lake used-car dealership that is accused of defrauding hundreds of people out of millions of dollars, in some cases wiping out entire life savings and retirement accounts.

Wynn Co. Inc., which had operated at 3068 S. Highland Drive since the mid-1990s, was forced in July to shut down after failing to pay off liens and deliver titles.

The state's Motor Vehicle Enforcement Division, in conjunction with the Attorney General's Office, said it is considering 24 third-degree felony counts against the company for alleged "double collateralizing" of automobiles in which several contracts were secured for the same vehicle, according to Jodi Monaco, a spokeswoman for that division.

In addition to possible felony charges, the Utah Division of Securities is conducting a fact-finding investigation and is expected to make a decision of whether to take civil or criminal action against the company by the end of this month, according to Michael Hines, the division's director of enforcement.

"The division is very concerned that investors may not have been protected the way it was represented that they were protected," said Hines, adding that most lenders were "ma and pa" investors having a limited sophistication of investing.

Even the Utah State Tax Commission said it is owed $295,000, according to court documents.

Complicating the issue, the company filed for Chapter 11 bankruptcy protection in July. The case was converted to a Chapter 7 liquidation case earlier this week.

Wynn Co. owes roughly $32 million in unsecured debt and has unencumbered assets of $214,000, according to a sworn affidavit by Dennis T. Wynn, president and owner of Wynn Co.

Anna W. Drake, a bankruptcy attorney representing Wynn Co. and W.F.G. Acceptance Inc. — an affiliate of Wynn Co. and also in bankruptcy — said the combined debt of the two companies totals more than $48 million, with $500,000 in contract receivables from the sale of vehicles.

Funds between the two companies were freely interchanged, according to court documents, unbeknownst to lenders.

Wynn's operation solicited potential investors by promising up to 18 percent returns on money loaned or "invested" into his company.

Lenders were told their money would be used to acquire used vehicles that would be sold to buyers with risky credit. Those who purchased the vehicles paid interest rates as high as 30 percent on their loans, creating a stream of income to the company and its lenders.

But many Wynn investors never saw more than a couple of months' interest payments and ended up losing their initial principal.

Frank Hart, 81, of Sandy, said he was introduced to the company through a licensed life insurance and securities dealer who assured Hart that he had investigated the company carefully.

Hart ended up losing $50,000.

"I invested in August of last year. I received in return a promissory note which was supposedly secured by 150 percent of the value of my note in automobile contracts and titles," Hart said.

Hart did receive four monthly interest payments from September through December of $417 each, 10 percent on his original investment. But the January check bounced.

"I made a written request by certified mail to examine the books, and they would never respond to that," he said.

So Hart went to the dealership where Larry Lee, a Wynn customer service representative, blamed the late interest payments on the 9/11 terrorist attacks, Hart said.

An Ogden couple, who asked not to be identified, said they lost $125,000, wiping out their entire retirement savings. The couple recently filed two claims in bankruptcy court totaling $270,000 against Wynn Co. in hopes of capturing their initial investment plus interest. But in order to survive, the couple has had to take out a $140,000 mortgage on their home, which was previously owned by the couple free and clear.

"It's just like we are starting out again. It took us 30 years to pay it off. Now it's going to take us another 30 years," the wife said.

"Those are the people who deserve protection from the Division of Securities the very most," Hines said. "Unfortunately, a lot of our fraud cases are cases in which people getting the money to invest in these programs turn out to be individuals who don't have money."

Calls to Dennis Wynn, a resident of Holladay, were not returned. However, Drake did offer a statement in which she recognized the plight of those who lost their money.

"I think it is fair to say that Mr. Wynn regrets what has happened to all of these people, and he would like to see them repaid," Drake said.

The nearly 700 investors in the Wynn Co. span the nation — from a man in Valencia, Calif., who lost $110,000 to a woman in Urbana, Ill., owed $7,500.

Sidney Madsen of Mesa, Ariz., said her father invested roughly $100,000 in a Wynn car dealership in Mesa, based on assurances that the investment was sound because Wynn was a former missionary for The Church of Jesus Christ of Latter-day Saints before pulling his money out.

Wynn continues to operate his Mesa, Ariz., dealership, Drake said.

"In the first few months, he was making a good return on his money at 12 percent interest. He got most of his out." Madsen said.

He may be one of the lucky ones.

Yet others may have little chance of ever seeing their investments again. A list of creditors holding the 20 largest unsecured claims against Wynn total more than $9 million, many of the unsecured claims made by family trusts.

"There is no doubt that there are a number of people who were harmed," said Michael R. Johnson, a Salt Lake attorney who represents one creditor who lost roughly $200,000. "Basically this guy was running a Ponzi scheme."

"It looks like he scammed the group about $28 million to $30 million," said lender Harold Howe of Salt Lake.

Other lenders wonder where their money went.

"It looks to me like we will not see a penny," said one investor, "no matter what happens to Mr. Wynn."


E-MAIL: danderton@desnews.com